Universities and Local Growth

Blog by Joanne Ennis

It is widely acknowledged that universities are a key driver of economic growth and prosperity. However in the post-election landscape, higher education institutions (HEIs) are being asked to play an ever greater role in the economy, particularly at local level, creating both challenges and opportunities for HEIs.

In the UK over 99% of businesses are SMEs and according to the Witty Review (Witty, 2013), future economic growth is most likely to be driven by high growth SMEs. Whilst HEIs have significant experience and expertise in supporting businesses to innovate and grow, the way in which they engage with business can also create barriers to innovation, particularly for smaller firms:

First of all, HEIs tend to target their business engagement activity towards firms that are already innovation-active. This excludes many SMEs, the majority of which are micro-enterprises with five or less employees (HEFCE, 2015) since they often lack the capacity or financial resource to support external R&D.

Secondly, traditional models of engagement for example knowledge transfer partnerships or contract research are heavily focussed on product or process innovation within high-tech sectors such as advanced manufacturing or engineering. This represents a rather narrow approach, particularly given that 70% of the UK’s 31 biggest clusters are service-led (Centre for Cities, 2014).

Universities are also crucial to ensuring the supply higher level skills to the labour market which will be needed for future innovation and growth. Yet a recent poll by the Association of Graduate Recruiters found that two-thirds of businesses have unfilled graduate vacancies and almost one-third stated that candidates often lacked specific skills (THE, 2015).

One of the ways that HEIs can respond to these challenges is by building more robust relationships with smaller firms. This is likely to include significant activity aimed at generating the demand for innovation within SMEs, particularly if they have not previously engaged with external R&D or are not already innovation-active.

In terms of employment growth the biggest expansion is predicted to come from the service sectors. This provides opportunities for universities to take a broader approach to business engagement by developing new models of innovation that address the needs of the service-led industries (UUK, 2015).

Overall, universities should seek to develop new, more cost-effective ways of engaging with business which are based around two-way collaboration, requiring a shift in emphasis from knowledge transfer to knowledge exchange (HEFCE, 2015). Furthermore, by involving business in core activity such as curriculum design and programme delivery will enable HEIs to be more responsive to market need.

In the context of further austerity there is increasing pressure on HEIs to expand their mission to include a focus on local growth. This trend is set to continue as cuts in public expenditure begin to impact on funding for universities and competition intensifies for access to resources and influence at sub-national level. The HEIs who will fare best under these conditions are those that are able to adapt and respond to this agenda.